2024 trends in multifamily: Retention is key
The real estate landscape is experiencing a pivotal shift in 2024 and now is a good time to ask yourself, what are the emerging trends in multifamily housing?
In the United States, this period stands out as the strongest quarter for supply, with over 85,000 units added in Q1 of 2024 alone. This is only set to continue with the largest new supply to hit the market in decades, projections indicate the delivery of 440,000 units throughout the year and an astounding 900,000 units also under construction. For property managers, understanding these trends is not just critical; it's a strategic imperative for navigating the challenges and opportunities that lie ahead.
The amount of renters undecided on whether to renew a lease
The amount of renters that do not renew their lease every year
The amount of landlords that know what tenants want
The significance
This unprecedented increase in supply underscores a crucial period of adjustment for the real estate market. Property managers are now faced with the dual challenge of attracting new tenants while also retaining current residents, who are contemplating their leasing options with increasing uncertainty. Surveys suggest that on average 20% of renters remain undecided about lease renewals, and a startling 50% of all renters ultimately choose not to renew their leases. This tenant turnover presents a significant operational challenge, impacting the financial health and stability of rental properties.
Exploring the expenses associated with vacant properties? Our Guide for Property Managers and Developers in Multifamily Housing has answers for your multifamily questions
In response, 41% of landlords have shifted their focus squarely onto leasing their vacant properties. However, this approach might prove to be a short-sighted strategy if tenant retention continues to be overlooked. The key message for property managers is clear: Tenant retention is paramount.
Notably, 57% of property managers recognize this dilemma and state that tenant retention is their number one priority. While the allure of new tenants is undeniable, the cost implications of high turnover rates — ranging from lost rental income to increased maintenance and marketing expenses — can erode profitability. Therefore, an emphasis on listening to and addressing tenants' needs is not just beneficial but necessary for long-term success. However, a 2024 survey revealed that a mere 17% of landlords claimed to have a clear understanding of their tenants' needs.
Don’t become part of the majority in the unknown. Let's explore what tenants are looking for in 2024.
The 2024 renter
To tailor strategies effectively, property managers need to have a firm grasp of the current renter demographics:
- 1 in 3 Americans rent, 61% of which reside in multifamily dwellings
- 63% of renters choose to rent for reasons other than not being able to afford a home
- The majority of American renters are between 35 to 44 years old (older Millennials), followed closely by those under 29 (younger Millennials and older Gen Z), indicating the need for amenities and community features that cater to these age groups
The top 5 asks
- Flexible working: In a 2023 survey, 1/3 of multifamily renters stated that they were working from home at least part-time, so it makes sense that 33% of Gen Z renters have said coworking spaces in apartment buildings is important to them. As hybrid work options are only set to increase, offering dedicated spaces that can be used as meeting rooms and co-working spaces will only become more and more critical to attracting and retaining high-quality tenants.
- Shared community spaces: It’s no joke that the ‘loneliness epidemic’ is a real public health concern. Which is why tenants 35 and up cited that ‘a sense of community’ is of great importance to them when considering renewing or signing up for a new lease. By creating spaces where members of the building can meet and gather - such as community gardens, rooftop patios, or hobby rooms – you can offer your tenants opportunities to foster connections and build communities within their building.
- Safe and secure: Safety is a top concern for everyone these days and with over 60% of American adults saying crime in the United States is a very or extremely serious problem, it’s easy to see why 63% of tenants move out due to a lack of security. Feeling safe in your home is a must and 86% of Millennial’s have said they’re willing to pay 20% more for a home with smart apartment technology like electronic access and keyless entry.
- Sustainable practices: Only 12% of landlords said they are prioritizing sustainability in 2024, yet tenants are increasingly looking for ways to bring eco-friendly initiatives into their daily lives. Be it by using sustainable building materials, automation to increase energy efficiency, or having recycling and compost options on site, 73% Gen Z tenants are willing to pay more for those sustainable living options.
- Tech-savvy solutions: Smartphones have become ubiquitous with modern living. Tenants want to be able to control their lighting, HVAC, apartment access control, and security without ever having to put down their phones – in fact, it’s so important that 44% of Millennial tenants are willing to sacrifice a parking space and 62% of Gen Zer’s a spare bedroom for smart living options. This goes even further, with 79% of all multifamily tenants saying they should be able to send a direct message or use an app to deal with any maintenance requests.
As we forge ahead into 2024, the real estate sector's landscape is decidedly tenant driven. For property managers, the ability to adapt to this market shift by prioritizing tenant retention through active listening and responsive management will not only be a differentiator but a pivotal factor in ensuring sustainability and growth.
In a market brimming with choices, tenants are more likely to stay where they feel valued and heard. In this era of multifamily living, the property managers who flourish will be those who view their tenants not just as renters, but as the heart of the communities they strive to cultivate.
